Path: bloom-picayune.mit.edu!snorkelwacker.mit.edu!news.media.mit.edu!americast.com!americast.com!usa-post Newsgroups: usa-today.bonus From: usa-post@AmeriCast.Com Organization: American Cybercasting Approved: usa-post@AmeriCast.com Subject: bonus Fri, Jul 31 1992 Date: Fri, 31 Jul 92 04:32:20 EDT Message-ID: 07-31 0000 BONUS: Money managers pick top stocks USA TODAY Update July 31-Aug. 2, 1992 Source: USA TODAY:Gannett National Information Network You hire a mechanic to fix your car. You turn to a pro to improve your golf swing. And whether you know it or not, you're paying a money manager to handle some of your investments. If you knew what stocks those pros are buying for your pension or mutual fund, chances are you could use that information to improve your personal investment portfolio. WHAT ARE MONEY MANAGERS' 10 FAVORITE STOCKS? USA TODAY asked 120 money managers to name 10 stocks that they think will post the best gains over at least the next six months and perhaps for the rest of the decade. Our pros' 1,200 picks were spread among 697 stocks. That's not a lot considering that more than 5,000 stocks trade actively in the USA. Fewer than 15% of those 5,000 got even one vote; more than 85% didn't get any. Our super-stocks list is the top 61 of the 697 - those with four votes or more. WHAT STOCK IS THE NO. 1 PICK? The champion is Philip Morris, which got 26 votes from money managers, or more than one in five. Next highest: drugmakers Bristol-Myers Squibb (19 votes) and Merck (17). Drug companies are a favorite: Four of the top 10 vote-getters are drug stocks. WHAT OTHER COMPANIES MADE THE TOP 10? Other dependable growth stocks in the top 10 include Coca-Cola, Microsoft, Gillette and Home Depot. Money managers seem reluctant to make a big bet on economically sensitive stocks, although they like such familiar names as Boeing, Ford and Chrysler. DOES A STRONG SHOWING GUARANTEE A WINNER? Philip Morris and other favorites are not guaranteed to be winners in the coming months or even the next year. But many money managers say such stocks are the safest bet to make solid gains over the next few years. SHOULD BABY BOOMERS THINK ABOUT INVESTMENTS? "The '90s will be the decade of investments," says Susan Byrne, president of Westwood Management in Dallas. "The baby boom generation has under-saved and over-consumed." Now, she says, boomers must scramble to make up for lost time and money not saved. WHAT'S THE BEST PLACE FOR LONG-TERM INVESTMENTS? Investment advisers say long-term savers should invest the biggest portion of their money - as much as they can - in stocks. And why not? Since 1926, stocks have posted an average annual return of 10.3%, vs. 4.8% for long-term Treasury bonds and 3.7% for short-term Treasury bills, says Ibbotson Associates. Inflation has averaged 3.1% a year. WHAT ABOUT TREASURY BONDS? Treasury bonds may appear attractive now, yielding 7.42% Thursday. But even the relatively modest difference between that average gain of 10.3% for stocks and the current yield for bonds would amount to a small fortune compounded over many years. Long term, the greater risk comes from being out of the stock market, not in it. You have to stay well ahead of inflation to build wealth, and historically stocks have been the best way to do that. WHAT DO PEOPLE MEAN WHEN THEY TALK ABOUT SMART MONEY STOCKS? They're usually referring to stocks recommended by money managers. Those are people who spend the entire work day trying to figure out if Coca-Cola stock is going to have more fizz than PepsiCo, or if RJR will smoke Philip Morris. Surprisingly, given that they're such an important part of the investment world, no one knows exactly how many money managers there are or how much money they invest. HOW MANY MONEY MANAGERS ARE THERE? CDA Investment Technologies keeps track of 757 money managers who controlled $2.3 trillion in investments at the end of last year. But the total number of money managers is much higher. Morningstar Mutual Funds publisher Don Phillips says mutual fund managers alone - just a slice of the money manager universe - total 1,680. WHAT DO MONEY MANAGERS LOOK FOR? "We want performance," says Heiko Thieme, portfolio manager at American Heritage fund, which last year was the No. 2-ranking general stock fund, up 96.6%. "What we're trying to do is be a little bit ahead of the market." Most are concerned mainly with long-term performance. Like most of his peers, Gerald Perritt, head of Perritt Capital, invests in stocks he believes have good 3- to 5 -year potential and tries not to worry about quarterly performance. Clients who bug him about a bad quarter don't get very far. HOW DO STYLES DIFFER? Some managers try to play wide-ranging trends such as controlling medical costs, repairing the USA's infrastructure or cleaning the environment. Once they pick a trend, they try to find companies most likely to benefit, then buy those stocks. Others say you have to start at the bottom and work up. Lauren Toll, of the Charter Capital Blue Chip Growth Fund, for example, reduces the stock-picking process to near-formula. Before he'll even consider a stock, it must meet six safety tests regarding earnings, debt, dividends and historic growth. ARE THERE SOME BASIC UNDERLYING IDEAS? Most managers are looking for stocks that have good growth prospects, those that can keep earnings rising at 15% or more year after year. "There are some things about investing that anyone can understand," says Linda Anderson, of the Rainbow Fund in New York. "One thing you do: You look at a company and basically ask, `How's it going to grow over the next 10 years?' " WHAT KIND OF STOCKS DO MONEY MANAGERS LIKE? Many money managers are simply looking for companies that make or sell established products that - for better or worse - "are the stuff of everyday life," says Anderson. There's no doubt that "the consumer is still the predominant factor in this economy," says Walter Campbell, Piedmont Capital Management. Anderson invested in Gillette only after giving the company's Sensor razor to her husband and friends to see if they liked it. They did. WHAT ARE THE FAVORITE STOCKS OF MONEY MANAGERS? Small wonder the most-touted stock was Philip Morris, whose main products are cigarettes, beer, food and coffee. Four drug makers, led by Merck and Johnson & Johnson, made the top 10. Money managers say the aging population will require more and more-varied drugs. Home improvement chain Home Depot and Wal-Mart finished strong, as did computer makers Apple and IBM, software makers Microsoft and Novell, and phone companies AT&T, MCI and Sprint. SHOULD EVERYONE INVEST IN THOSE STOCKS? John Markese, research director at American Association of Individual Investors warns that individual investors shouldn't rush into such stocks. He calls them "herd stocks that are on everybody's list." He argues that most of the stocks are touted by the pros because they've done well historically and are closely followed by Wall Street analysts. That doesn't mean much about how they'll perform from here, he says. Bonus Editor: Susan Andrews. (1-919-855-3491) Making copies of USA TODAY Update (Copyright, 1992) for further distribution violates federal law. This article is copyright 1992 Gannett News Service. 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